Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.19.3.a.u2
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
Operating Obligations
In connection with the execution of certain lease agreements, we have committed to provide capital improvements on certain of our farms, which are summarized in the table below (dollars in thousands):
Farm
Location
 
Farm
Gross
Acreage
 
Total
Commitment
 
Obligated
Completion
Date(1)
 
Amount Expended
or Accrued as of
December 31, 2019
Ventura, CA
 
413
 
$
1,000

 
Q1 2020
 
$
664

Madera, CA
 
928
 
500

(2) 
Q1 2020
 
402

Hillsborough, FL
 
55
 
2,250

(2) 
Q2 2021
 

Cochise, AZ
 
1,761
 
1,820

(2)(3) 
Q4 2021
 

Cochise, AZ
 
1,239
 
1,360

(2)(4) 
Q4 2021
 

Van Buren, MI
 
119
 
150

 
Q4 2021
 

Columbia, OR
 
200
 
1,800

(2) 
Q3 2024
 
1,146

Collier & Hendry, FL
 
5,630
 
2,000

(2) 
Q2 2025
 

Salinas, CA
 
324
 
100

 
Q4 2025
 
1

(1) 
Our obligation to provide capital to fund these improvements does not extend beyond these respective dates.
(2) 
Pursuant to contractual agreements, we will earn additional rent on the cost of these capital improvements as the funds are disbursed by us.
(3) 
Pursuant to the agreement, we will only earn additional rent if the total amount of capital improvements exceeds $1.3 million
(4) 
Pursuant to the agreement, we will only earn additional rent if the total amount of capital improvements exceeds $860,000
Ground Lease Obligations
In connection with two farms acquired on June 1, 2017, through a leasehold interest, we assumed two ground lease arrangements under which we are the lessee (with the State of Arizona as the lessor). These two operating ground leases expire in February 2022 and February 2025, and neither lease contains any extension, renewal, or termination options. Upon our adoption of ASU 2016-02 on January 1, 2019, we recognized an operating lease right-of-use asset of approximately $218,000 and an operating lease liability of approximately $213,000 as a result of these ground leases. These values were determined by discounting the respective future minimum lease payments using a discount rate equivalent to treasury rates with similar terms plus a spread ranging from 2.47% to 2.53%.
As of December 31, 2019, we recorded the following as a result of these operating ground leases (dollars in thousands, except for footnotes):
Operating lease right-of-use assets(1)
 
$
178

Operating lease liabilities(2)
 
$
172

 
 
 
Weighted-average remaining lease term (years)
 
4.6

Weighted-average discount rate
 
4.20
%
(1) 
Operating lease right-of-use assets are shown net of accrued lease payments of approximately $6,000 and are included within Other assets, net on the accompanying Consolidated Balance Sheet.
(2) 
Included within Other liabilities, net on the accompanying Consolidated Balance Sheet.
As a result of these ground leases, we recorded lease expense (included within Property operating expenses on the accompanying Consolidated Statement of Operations and Comprehensive Income) of approximately $50,000 and $48,000 during the years ended December 31, 2019 and 2018, respectively. Future lease payments due under the remaining non-cancelable terms of these leases as of December 31, 2019 and 2018, are as follows (dollars in thousands):
 
 
Future Lease Payments(1)
Period
 
December 31, 2019
 
December 31, 2018
2019
 
$

 
$
47

2020
 
47

 
47

2021
 
47

 
47

2022
 
30

 
30

2023
 
30

 
30

Thereafter
 
31

 
31

Total undiscounted lease payments
 
185

 
232

Less: imputed interest
 
(13
)
 

Present value of lease payments
 
$
172

 
$
232

(1) 
Annual lease payments are set at the beginning of each year to then-current market rates (as determined by the State of Arizona). The amounts shown above represent estimated amounts based on the lease rates currently in place.
Litigation
In the ordinary course of business, we may be involved in legal proceedings from time to time. We are not currently subject to any material known or threatened litigation.